Assistant Secretary of Commerce Michael C. CamuÑez

Market Access and Compliance

North American Competitiveness Conference
Tuesday, November 8, 2011
San Diego, California

As prepared for delivery.

Good morning everyone.

Let me start by extending my appreciation to the Mexico Business Center and the San Diego Regional Chamber of Commerce for hosting the Second Annual North American Competitiveness Conference. I know from colleagues that it was a very successful event last year and we are thrilled to see it happen again this year.

I’d like to also thank SDGE and Sempra Energy for providing the title sponsorship for this event as well as the University of San Diego and the many other sponsors and contributors that have helped to make this conference possible. Today’s agenda shows a promising array of panel topics, exploring the opportunities and obstacles for deeper supply chain integration between U.S., Canadian and Mexican businesses in several key sectors.

This conference is not only timely, but important as our countries strive to move beyond the existing benefits of the North American Free Trade Agreement (NAFTA) and explore additional means of economic cooperation and market integration. North American Competitiveness will be a focus of the North American Leaders’ Summit as well as on the margins of APEC, where I’m headed tomorrow.

Strengthening our economic ties and facilitating cross-border trade among our three nations will help deepen North American competitiveness and improve our collective position in the challenging global economic environment we face today.

Events like this highlight the importance and need to continue building upon the existing foundation of our economic relationship. We share many goals and values as a region, and we should build on the strong spirit of cooperation exhibited by our citizens, business communities, and governments throughout the years. Growing up on the border and having lived in California, I can really appreciate its importance.

It’s a privilege to be here today to discuss North American competitiveness and share the many ways our countries are working together to reduce regulatory barriers, facilitate cross-border trade through infrastructure improvements at ports of entry, and accelerate the flow of goods and people across our shared borders.

Let me first begin by providing some background on the role of the Commerce Department under the President’s trade agenda. As the Assistant Secretary of Commerce, I have the responsibility and privilege of working with our trading partners worldwide to advance the goals of the President’s National Export Initiative (or the “NEI” as we call it).

Like the American Jobs Act you heard in the President’s address to Congress last month, the NEI is a key component of the President’s economic recovery plan. Through the NEI, we are working hard to open new markets for U.S. goods and services, double our overall exports by 2014, and deepen our strategic trading relations around the world—all with the aim of growing the economy and putting millions of people back to work. My primary responsibilities under the NEI entail working to create the conditions and business climate -- I like to call it the “ecosystem” -- that foster and promote trade and investment as drivers of economic growth and prosperity. This includes working on policy initiatives to develop the legal and regulatory framework necessary to support trade and investment and to promote innovation and competitiveness. A big part of my job is to help business like yours overcome the trade barriers that keep you from competing effectively and growing your business.

And that’s what has brought me here today: to develop innovative solutions to grow cross-border trade and increase global competitiveness on both sides of our shared borders.

The Promise of the North American Relationship
At the 2009 North American Leaders Summit in Guadalajara, Mexico, the leaders of our three countries came together to, among other things, promote the global competitiveness of our region by working together to accelerate economic recovery and job creation, and building a strong base for long-term prosperity. In their joint statement, leaders acknowledged that our integrated economies are an engine of growth. They highlighted investments in advanced technology and border infrastructure, with the goal of creating truly modern borders which facilitate trade and the smooth operation of supply chains, and also commended the progress made on reducing unnecessary regulatory differences. They also addressed the need to continue this work.

In a few days, on November 13, President Obama will host Prime Minister Stephen Harper of Canada and President Felipe Calderon of Mexico for the North American Leaders’ Summit in Honolulu, Hawaii. The meeting will build on wide-ranging, on-going cooperation among the United States, Canada, and Mexico with a particular focus on competitiveness, including border facilitation and regulatory cooperation, in addition to many others issues.

More than just priorities agreed upon by our heads of state, the North American relationship is evident every day in the strong bonds between our three societies. This is reflected in the tens of thousands of students, teachers, and researchers participating in exchanges between our schools and universities, and the more than one million people who cross our shared borders every day.

We are friends and partners who share borders, but, more importantly, we share fundamental values.

The North American relationship is an important economic asset for all three of our countries, and I am personally committed to seeing it flourish. Let’s take a look at some of the facts:

Canada and Mexico are our first and third largest merchandise trading partners and accounted for 32.3 percent of our exports to the world in 2010.

Total merchandise trade between the United States and its NAFTA partners has grown from $293 billion in 1993 to $920.1 billion in 2010, an increase of 214 percent.5

Each day the United States conducts $2.5 billion in trade with its NAFTA partners, Canada and Mexico. To put this in perspective, this translates to $1.8 million a minute, and that’s excluding trade with Canada and Mexico.

GDP growth in the NAFTA countries between 1993-2010, has been significant:

United States: 55% growth

Canada: 59% growth

Mexico: 51% growth

Overall investment between the United States and its NAFTA partners grew from $358 billion in 2003 to $606 billion in 2010, an increase of 69 percent.

Even so, we are a long way from reaching our potential – and keeping the momentum going is what I’d like to talk about today.

I think we’d all like the coming years to set new records for North American trade.

We all know what that could mean for all three of our countries, especially as the Obama Administration fights to strengthen America’s still fragile recovery.

As you probably know, more than 2.5 million private sector jobs have been created over the past 18 months. But too many people in our nation continue to look for work. As the President has said, we have more to do.

That’s why this Administration is making unprecedented efforts to facilitate trade and help U.S. companies find commercial partners beyond our borders through the NEI.

The more goods and services U.S. businesses export, the more they will produce. And the more businesses produce, the more workers they need. And that means jobs. Jobs for the United States, Canada and Mexico.

We’re already off to a good start. Exports have been a key driver of America's economic recovery. In 2010, U.S. exports of goods and services totaled $1.84 trillion, an increase of nearly 17 percent over 2009 levels.

And exports have been growing at a strong pace overall in the first six months of this year, up 17.9 percent over the same period last year. The numbers for our trade with Canada and Mexico are equally strong—total trade was up 16% in 2010.

These statistics are more than numbers. They matter, especially in this economic climate. In July, the International Trade Administration, or ITA, reported that U.S. exports supported an estimated 9.2 million jobs in 2010, up from 8.7 million in 2009.

And these are good-paying jobs – paying up to15 percent more than the typical wage in America.

…Exactly the type of jobs we need a lot more of.

In the first quarter of 2011, exports accounted for 13.4 percent of all U.S. economic output, which is the biggest portion of our economy since the Commerce Department began tracking quarterly figures in 1947.

But we can – and we must -- do more. And the strategic trade relationship between the United States, Mexico and Canada will play a critical role in our economic recovery. So let me touch on a few issues that are relevant to our discussions today.

The Importance of Border Management with Canada and Mexico
The first issue —and perhaps most important—is the need for improved infrastructure and clearance procedures at the borders.

As close trading partners, the United States, Mexico and Canada share not just borders but highly integrated supply chains and co-production. A large percentage of that incredible volume of trade I just described crossed the border each day by truck. 85% of the daily trade with Mexico crosses by truck. And as this audience knows well, certain manufacturing processes regularly require crossing the border as many as three to four or more times. This means that delays at the border not only increase transportation costs but also interrupt manufacturing and delivery cycles.

With today’s just-in-time manufacturing system, unpredictable wait times can act as barrier and deterrent to trade, inhibiting cross-border economic investment.

Border delays impact productivity, industry competitiveness, and result in lost business income and reduction in gross output in the United States, Canada and Mexico.

Long-term costs can also accrue to companies and even companies through relocation pressures, requiring industries to move from their best location and optimum supply chain, which alters investment patterns, prices, and demand.

In this region, a 2006 San Diego Association of Governments study found that traffic congestion and delays at crossings between San Diego County and Baja California, cost the U.S. and Mexican economies an estimated $3.3 billion in gross output in 2005 and roughly 19,000 lost jobs due to the reduction in output. This study is only about 5 years old, and I suspect the situation has not materially improved.

Part of the problem, of course, is inadequate infrastructure capacity, which is failing to keep up with the increase in trade and security requirements.

Many ports of entry (POEs) were built decades ago, and were simply not designed for the dramatically increased truck traffic that now flows across the U.S.-Mexico border. For example, the Mariposa POE in Nogales, which was built to handle 300 trucks daily, now handles roughly 1,600.

Recognizing the critical role that cross border trade plays in the economic growth of North America, North American leaders have made two separate but important bilateral commitments related to our shared borders; one between the U.S. and Mexico, the other between the U.S. and Canada.

Related to the southern border, President’s Obama and Calderon issued a Joint Declaration on 21st Century Border Management during President Calderon’s official state visit to Washington in May of 2010. This declaration committed the United States and Mexico to full and renewed cooperation based on the principles of joint border management, co-responsibility for cross-border crime, and a shared commitment to the efficient flow of legal commerce and travel.

The 21st Century Border Management initiative has three areas of focus that are overseen by a bi-national Executive Steering Committee (ESC), of which my office in the Department of Commerce is a part, and three working groups:

Border Infrastructure;

Secure Flows of Goods and People; and

Corridor Security.

Recognizing that border trade facilitation has been studied to date, and what’s needed is action, the ESC developed a 12-month action plan for the border region, which seeks to enhance economic competitiveness by supporting a bilateral border master plan process for infrastructure projects in order to increase capacity; expand trusted traveler and shipper programs; and explore opportunities for pre-clearance, pre-inspection, and pre-screening processes for commercial goods and travelers.

I’m pleased to report that we are already seeing positive results from our efforts:

The San Luis II commercial crossing in San Luis, AZ and the Donna-Rio Bravo Bridge in Donna, TX were completed in late 2010;

This year saw the completion of the construction for seven new northbound commercial lanes at the Laredo World Trade Bridge and the groundbreaking for the new West Rails Bypass project in Brownsville, Texas;

And in July of this year, we celebrated the groundbreaking for the new Tornillo-Guadalupe international port of entry in El Paso County (which is slated for completion by summer of 2013). This new six lane border crossing facility will be one of the largest in the nation and capable of serving vehicular, pedestrian and commercial traffic.

The ESC is also currently conducting wait time pilots at seven ports of entry. The end goal is to install the appropriate technology to measure wait times and provide real time information for customs officials, shippers and travelers and shippers in order to inform operations and staffing decisions, as well as the redirection of users to other neighboring POEs that are less congested.
And of course the ESC is also working to support the master plan effort here in the San Diego-Tijuana region and many of the initiatives called for there.

Our colleagues in Customs and Border Protection as well as the Departments of State and Transportation have been hard at work. But so have we in the Department of Commerce. Our main objective is to ensure that as we work towards improved border management, we are always careful to solicit, consider and include the voice of industry in the process. Stakeholder involvement is critical to our success, and that’s why we’ve formally reached out to industry with a request for comments concerning industry’s priorities along the border. And here’s what we’ve heard. Industry has called for the expansion or creation of:

Mutual recognition of trusted trader programs;

Pre-clearance and pre-inspection away from our borders;

A single-window data platform for imports and exports; and

Broad interagency and bilateral coordination at the border on inspections and processes.

We are now working with our colleagues in the United States and Mexico to make sure these issues are addressed in our ESC Working Groups. The ESC will be meeting in Mexico City next month to assess progress and pursue next steps.

Now, regarding the northern border, when President Obama and Prime Minister Harper met last February, they announced a new vision for managing mutual responsibilities, both at and beyond the border.

Through the “Beyond the Border (BTB)” initiative, the United States and Canada are focusing on issues such as cross-border law enforcement and the impact of border security measures on U.S. and Canadian businesses.

This shared border vision lays out four key pillars for cooperation:

Addressing threats early;

Promoting trade facilitation, economic growth, and jobs;

Cooperating on integrated cross-border law enforcement; and

Developing critical infrastructure and cyber-security.

Both countries are currently working together on an action plan for the BTB initiative to ensure that concrete steps are taken to improve on border management efforts.

Deepening Trade with Canada and Mexico through Enhanced Regulatory Cooperation

Efficient and secure borders are essential to our ability to grow our economies and create more jobs in North America, but it’s not enough. That’s why we’re also working on other initiatives that are important to advancing our overall trade relationship with Canada and Mexico.

Two recent initiatives of great importance for both Canada and Mexico concern our commitments to cooperate in how we adopt regulations that affect business activity. There’s no need for me to tell you how regulations – done poorly – can impact businesses. Our administration is committed to streamline our approach to regulation, making sure that we do not unnecessarily burden companies—especially small and mid-size businesses—with excessive regulations. Of course, there is a proper role for regulation, and we are committed to protecting the environment, public health, and public safety. But too often our governments take divergent and unnecessarily different approaches to regulation that only result in added burdens and increased transactions costs that get in the way of productivity, growth and job creation.

This is why last May, President Obama signed an Executive Order directing all federal agencies to work to harmonize, simplify and coordinate rules to reduce the cost of regulations. So far more than 500 reforms worth billions of dollars in savings have been identified. The Calderon Administration in Mexico has undertaken a similar review and has made excellent progress in eliminating excessive regulations throughout the Mexican federal government.

Likewise, Prime Minister Stephen Harper created the Red Tape Reduction Commission to identify regulatory requirements that have a clearly detrimental effect on growth, competitiveness, and innovation.

But we can’t stop with considering the regulations that are already on the books. We have to ensure that our governments work closely together to ensure that we take more consistent approaches in the adoption of future regulations, especially those in emerging sectors that are highly innovative and can lead to economic growth and job creation. Given the highly integrated nature of our economies, regulatory divergence often achieves little substantive outcomes but can impose significant transactions costs on firms doing business on both sides of the border. If we can achieve better cooperation in our approach to developing regulations, including technical regulations that incorporate sometimes competing industry standards, we can go a long way to growing our trade relationship.

That’s why the United States has launched a bilateral High Level Regulatory Cooperation Council (“HLRCC”) with Mexico as well as a Regulatory Cooperation Council (“RCC”) with Canada. The HLRCC and the RCC have a mandate to ensure that our governments’ overall approach to regulation balances the need to promote economic growth, job creation, and benefits to our consumers and businesses as we endeavor to ensure the safety of our products, our people, and our environment. Both regulatory Councils will focus especially on cooperating on “up-stream” regulations—working together to develop common, consistent approaches to developing new regulations in emerging sectors that don’t yet exist. This will ensure that our companies on both sides of the border will face fewer difficulties trying to get the same product to conform to two different regulatory schemes that are designed to achieve the very same thing. It will, we hope, save time and money without compromising public safety or health.

The HLRCC and the RCC are led on the U.S. side by the White House’s Office of Management and Budget. Our role in the Department of Commerce is to ensure that the business community and key stakeholders have an opportunity to participate fully in the process and to ensure that the impact of regulations on trade is fully considered. We have solicited feedback through a formal Request for Comment that was published in the Federal Register. The results from that solicitation pointed strongly to the need for greater cooperation on customs facilitation at the border, but also identified several sectors where enhanced regulatory cooperation and convergence could increase trade.

Both Mexico and Canada have undertaken a similar effort to solicit feedback from their industry, and now senior officials, on a separate bilateral track, from the U.S., Mexico and Canada are in the process of developing action plans taking into account the input received in all three countries. Issues being considered are related to food safety, automotive standards, and nanotechnology.

El Paso Border Trip, Renewable Energy and Trade Promotion Efforts

In addition to our efforts to improve border customs and facilitation and pursue regulatory cooperation in emerging, high growth sectors, the Department of Commerce is also working hard to promote trade along our shared borders in other ways.

Just two weeks ago, I was in El Paso with the Director General of Mexico’s Secretariat of Economy to discuss with border stakeholders how infrastructure investments and improvements in customs procedures can facilitate increased trade in the region. Together, we met with many of the principal exporters on both sides of the border—maquiladora executives representing the Mexican private sector and U.S. small and medium sized business owners who comprise the maquiladoras’ supply chain. We had excellent discussions with both groups and received useful feedback, which we will incorporate into our respective government’s efforts to grow trade along our southern border.

We also visited one of the busiest ports of entry on the U.S.-Mexico border where we were briefed by senior U.S. Customs and Border Protection officials regarding the challenges of advancing our dual interests: security and commerce. We communicated industry concerns and gained useful information that will inform our efforts on behalf of our respective private sectors. I should also mention that this morning I took a port tour of the Otay Mesa commercial port of entry, to get a sense of the dynamics taking place in your region of the border.

The second area of focus is on key sectoral initiatives. Let me touch on 3. First, deepening trade in renewable energy and energy efficiency. A few weeks ago I spoke at the U.S.-Mexico Border Energy Forum Plenary Session, where I offered insight into Commerce’s efforts to develop the untapped potential of the border region, particularly that of the renewable energy sector in Mexico. Mexico’s demand for electricity will double in just a few years. Currently, it draws under 5% from renewable, so it’s a significant market.

Consequently, last month, the Commerce Department’s Under Secretary for International Trade was in Mexico City along with 19 U.S. clean energy companies for two days of meetings with senior Mexican officials on renewable energy and energy efficiency policy development.

While in Mexico City, Under Secretary Sanchez and the delegation met with the Mayor of Mexico City, three commissioners from Mexico’s energy regulator (CRE); the President of CFE – the state-owned utility company; and the Secretariat of Energy. The delegation also participated in the first U.S.-Mexico Renewable Energy and Energy Efficiency Policy Roundtable.

The meetings made clear that there is significant potential in Mexico for renewable energy development and that the Mexican Government is willing to work closely with U.S. companies.
The policy visit allowed for an informative and productive exchange between the U.S. companies and Mexican government officials on key topics such as: 1) the pricing of renewable energy, 2) transmission and grid access issues, 3) electricity subsidies, 4) tendering procedures, and 5) performance requirements and standards.

It allowed the Mexican government to highlight their renewable energy goals as well as their targets for promoting the deployment of renewable energy technologies, which will no doubt create business and job opportunities in both the United States and Mexico.

This renewable energy policy mission is a good example of Commerce’s commitment to exploring how to deepen cross-border trade in emerging sectors of the economy that hold the most promise for growth and job creation and how to eliminate market access barriers to trade in these innovative products and services.

In addition to these efforts, Commerce is interested in working more closely with Canada and Mexico on specific sectors which demonstrate high levels of growth potential and support export growth for small- and medium-sized enterprises such as automotive parts and medical technology, which non-coincidentally are not sectors of focus for this conference.

Automotive and parts
The United States, Canada and Mexico are major automotive producing and exporting countries. Over the past five years, Mexican production has averaged 1.9 million vehicles, with exports accounting for 44% of that production. In 2010, the U.S. exported $17 billion in auto parts to Mexico. It is the U.S. industry’s second largest export market and holds excellent growth prospects because it has multiple free trade agreements and its own production is growing, providing a stronger basis for U.S. parts and assembly.

With regard to Canada, twenty percent of U.S.-Canada trade comes from the $90 billion-a-year auto industry. It has achieved nearly complete cross-border integration of production and marketing activities. Non-tariff barriers to fully integrated trade in the automotive and auto parts industry in North America include problems related to movement of goods across the border and divergent standards for vehicles and auto parts. We are working to address these barriers through the initiatives I’ve just described.

Medical Technology
Similarly, medical technology shows great potential as a sector for increased trilateral cooperation. With a mature free trade agreement under the NAFTA, the medical technology industry has taken advantage of preferential terms of trade, which has boosted its competitive position vis-à-vis other countries as well as the benefits of proximity in trading with neighbors.

From 2004 - 2009, the global med tech market grew from $160 billion to $233 billion. Being the largest producer and consumer of med tech products in the world, the U.S. market exceeded $100 billion in 2010. And in 2009, U.S. exports of medical devices to the world were $31.5 billion, of which $1.7 billion and $2.6 billion to Canada, two of our top 5 export markets in this sector.

The Medical technology sector in North America could benefit from a cooperative program to more closely align our regulatory regimes for medical devices to eliminate additional obstacles to trade between the three countries, and we continue to explore how we can cooperate in this critical sector.

Conclusion

Let me close with this. The fact that Canada and Mexico are our first and third largest trading partners respectively, and combined account for 32 percent of all U.S. exports to the world, reflects the profound importance of our economic integration.

The imperative before us – even in a post-9/11 world in which our nations are working more closely than ever to improve security – is to enhance the legitimate free flow of people, goods and services across our borders. Doing this means expanding our companies’ and our region’s economic competitiveness in an increasingly competitive world.

More than ever, countries around the world are looking for anything that will give them a competitive edge. That’s why it’s critical that the North America take full advantage of the edge we already have: our shared borders and our shared values and priorities.

Anything less means letting down our people – folks counting on us to ensure that they have a shot at the very opportunity that calls people to our shores.

I want to thank Mexico Business Center and the San Diego Region Chamber of Commerce again for the opportunity to shine a spotlight on our North American trade relationship, its importance for our shared border communities, and the need for continued regional collaboration in promoting new trade opportunities for businesses on both sides of our shared borders.

Please know that the International Trade Administration and the Department of Commerce are eager to be a partner with you in strengthening the North American commercial relationship and improving the quality of life for all citizens in the region.

I appreciate having the opportunity to share with you the robust agenda we are pursuing to deepen our trade relationship along the borders.

The International Trade Administration, U.S.
Department of Commerce, manages this global trade site to provide access to ITA information on promoting trade and investment, strengthening
the competitiveness of U.S. industry, and ensuring fair trade and compliance with trade laws and agreements. External links to other Internet
sites should not be construed as an endorsement of the views or privacy policies contained therein. This site contains PDF documents.
A PDF reader is available from Adobe Systems Incorporated.